Courtney v Powell
[2012] NSWSC 460
•11 May 2012
Supreme Court
New South Wales
- Amendment notes
Medium Neutral Citation: John Patrick Courtney v Maureen Anne Powell; Peter Michael Courtney v Maureen Anne Powell [2012] NSWSC 460 Hearing dates: 18, 19 and 20 April 2012 Decision date: 11 May 2012 Before: Ball J Decision: See paragraphs 83 to 87 of this judgment.
Catchwords: EQUITY - undue influence - presumption of undue influence - whether presumption arises from relationship between parties - eldery father and daughter - father suffering from mild dementia - whether presumption rebutted. EQUITY - unconscionable conduct - daughter caring for father - whether father's medical condition gave rise to a 'special disability'. FAMILY PROVISION - adult sons - one son homeless and estranged for 36 years - other son dependant on pension - whether adequate provision made - whether notional estate order should be made - intention of deceased - difference between intention and effect of transaction. Legislation Cited: Family Provisions Act 1982 (NSW)
Succession Act 2006 (NSW)
Trustee Companies Act 1984 (Vic)Cases Cited: Allcard v Skinner (1887) 36 Ch D 145
Andrew v Andrew [2011] NSWSC 115
Bridgewater v Leahy (1998) 194 CLR 457
Brown v New South Wales Trustee & Guardian [2011] NSWSC 1203
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
Foley v Ellis [2008] NSWCA 288
Hewitt v Gardner [2009] NSWSC 1107
Jedda Investments Pty Ltd v Krambousanos (1997) 72 FCR 138
Johnson v Buttress (1936) 56 CLR 113
Quek v Beggs (1990) 5 BPR 11,761
Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201
Spong v Spong (1918) 18 CLR 544
Stivactas v Michelatos (No 2) (1993) NSW ConvR 55-683
Tulloch (deceased) v Braybon (No 2) [2010] NSWSC 650
Vigolo v Bostin [2005] HCA 11; 221 CLR 191
Watkins v Combes (1922) 30 CLR 180Category: Principal judgment Parties: John Patrick Courtney (Plaintiff in 2011/13199)
Peter Michael Courtney (Plaintiff in 2010/422321 and First Defendant in 2011/13199)
Maureen Anne Powell (Defendant 2010/422321 / Second Defendant in 2011/13199)Representation: IF Butcher (Plaintiff in 2011/13199)
CF Hodgson (Plaintiff in 2010/422321 and First Defendant in 2011/13199)
TJ Morahan (Defendant 2010/422321 / Second Defendant in 2011/13199)
Milne Berry Berger Freeman (Plaintiff 2011/13199)
MacGillivrays (Plaintiff 2010/422321 and First Defendant in 2011/13199)
Grogan & Webb (Defendant 2010/422321 / Second Defendant in 2011/13199)
File Number(s): 2011/13199 & 2010/422321
Judgment
Mr John Michael Courtney (the deceased) died in January 2010 at the age of 93. He made his last will on 10 February 2006. He was survived by three children, who I will refer to as John, Peter and Maureen. By his will, and in the event that his wife predeceased him (which happened), the deceased appointed Peter and Maureen to be the executors of his will. He gave the sum of $2,000 to John and the residue of his estate to Peter and Maureen in equal shares. At the time the deceased made his will, his estate consisted of a house in Pitt Town, which at the time was valued at approximately $640,000, together with cash of approximately $200,000. However, on 19 July 2007, the deceased transferred the house at Pitt Town to Maureen for an expressed consideration of $1. In these proceedings, Peter seeks to set aside that transfer on the basis of undue influence on the part of Maureen or on the basis that the transfer was an unconscionable dealing. Alternatively, Peter makes an application under s 59 of the Succession Act 2006 (NSW) (the Act) that provision be made out of the deceased's estate for his maintenance and, in connection with that application, seeks an order pursuant to s 80 of the Act designating as notional estate the Pitt Town property. John also seeks an order for provision under s 59 and an order designating the Pitt Town property as notional estate under s 80.
Factual background
The deceased married his wife, Annie, in 1938. John was born in May 1939 and is currently 72 years old. Peter was born in February 1943 and is now aged 69. Maureen was born in May 1954 and is now aged 57.
John
John left school at the age of 15. He attended technical college to study footwear. He has worked in various jobs including with the post office, in a footwear factory, as a storeman in various warehouses, with the Water Board as a pipe layer, with Woolworths and in a factory as a cleaner. He lived at home until the age of 29, when he left and moved to Melbourne. Over the next 4 years, he had some contact with his family and during that time he attended Maureen's wedding. However, by about the age of 33, he had lost all contact with his family and had no contact with his parents or siblings until 2010, when Peter tracked him down in Melbourne, following the death of their father. John offers no particular reason for why he had no contact with his family for approximately 36 years. He describes his relationship with his father as poor and he gives some evidence that his father was strict with him as a child. But there is no suggestion that either he or his father did anything in particular which brought their relationship to an end and he says that he had a close relationship with his mother, yet he lost all contact with her as well.
John has no significant assets. He receives an aged pension of $729.30 per fortnight. He currently resides in an aged care hostel operated by Sacred Heart Mission. He has lived there since December 2010. Prior to that time, he was homeless, sleeping on the street or at a sports oval and carrying his everyday belongings in a trolley. The terms on which John resides at the hostel are set out in a resident agreement. Under the terms of that agreement John is liable to pay Sacred Heart $39.50 per day, although, since John became a permanent resident of the hostel, the government contributes approximately $12 per day of that amount. In return, Sacred Heart agrees to provide John with (to the extent necessary) personal assistance with matters such as personal hygiene, eating, dressing, and moving about, with 3 meals per day and with accommodation, as well as other ancillary services.
Clause 1.5 of schedule 6 of the agreement gives Sacred Heart the right to terminate the agreement:
If You have not paid any fee due under this Agreement to Us within 42 days after the date upon which it became payable for a reason within Your control ...
John has not paid the daily resident fee and, as at 31 August 2011, owed Sacred Heart approximately $12,000 in respect of unpaid fees. However, Sacred Heart has not taken any steps to terminate the resident agreement and there is no evidence to suggest that it will do so in the near future.
With one exception, John does not have any significant expenses. The exception is that he is a compulsive hoarder. He currently rents space in 4 storage places for a total fee of approximately $840 per month. The objects he stores in those facilities include things such as porcelain, glassware, old televisions and stereo equipment. The evidence suggests that Sacred Heart has not insisted that John pay the amounts due under the resident agreement because it is concerned that, faced with a choice of giving up his possessions and giving up his residence in the hostel, there is a risk that he would choose the latter. John, however, gave no evidence in chief concerning his attitude on that subject and was not cross-examined on it. He did say in cross-examination that he needed to go through his possessions to reduce the number he had. He thought that if he did that he could eliminate one of the storage spaces he currently rents.
John has no serious illnesses or disabilities at present.
Peter
Peter left school in 1957 at the age of 14. He then started work as an apprentice barber. In 1964, he bought a milk run with help from his parents, which he operated for 10 years. He then bought a truck and worked as a truck driver until he retired in 2008. He has received the aged pension since February 2007, which currently is $564.60 per fortnight. He has two children by his first wife. He married his second wife, who is 58 years old, in May 2001. She is unemployed at the moment and is in receipt of unemployment benefits, which are currently $420.89 per fortnight. She is looking for factory work. Peter lives with his wife and stepdaughter, who is 25, in a house at Werrington Downs. He has no serious illnesses or disabilities at present, although he suffers from some hearing loss.
Peter generally had a good relationship with his father during the course of his life. He used to visit his parents regularly and helped his father with odd jobs from time to time. There is a dispute between Peter and Maureen concerning the degree to which Peter remained in contact with the deceased following the death of their mother in February 2007. According to Peter, he continued to see the deceased regularly and the deceased used to stay with him on weekends from time to time. According to Maureen, Peter and members of his family rarely saw his father and never rang to enquire about the deceased's health or wellbeing. As I will explain shortly, Maureen was inclined to underestimate her own financial position and I think that it is likely that she was also inclined to understate the relationship between the deceased and Peter following their mother's death. That relationship was nothing like as strong as the relationship between the deceased and Maureen, but I accept Peter's evidence that he continued to see his father regularly and took an interest in his welfare.
There is also a dispute between Peter and Maureen concerning the extent to which the deceased provided assistance to Peter during his lifetime. Peter gave evidence that the deceased gave him a car in July 2001 worth $3,000. It also emerged during cross-examination that the deceased gave Peter $7,000 following a knee operation Peter had in 2007. Peter also gave evidence that the deceased lent him $15,000 in about 1992 for a replacement engine for his prime mover and $2,000 in March 2001 to enable him to register his truck, both of which he repaid. There is no evidence that contradicts Peter's evidence that he repaid the loans and, on the basis of the material before me, I am not prepared to conclude that Peter did not tell the truth when he gave that evidence. Maureen also gave evidence that the deceased told her that he had given Peter $12,000 to fund a trip to the Philippines. Peter denied that the deceased had given him that money and he was not cross-examined on that denial. Again, in the absence of any other evidence, I accept that Peter was telling the truth when he gave the evidence he did.
Lastly, Peter gave evidence that the deceased and his mother provided him with some assistance to acquire a house in Pitt Town. Originally, a one third interest in the property was transferred to him for $21,667 on 26 February 1988. The balance of the property was transferred to him two and a half months later. The transfer shows that that was for a price of $100,000. However, Peter says that he in fact paid only about $45,000. Peter explains the difference on the basis that, following the transfer of the one third interest to him, he started to build a shed and two-storey house on the property. The transfer amount reflects the additional value of the property as a result of that work and was included for stamp duty purposes. However, the price he actually paid his parents was based on the value of the property after deducting the amount that Peter had spent on the shed and house at the time of the transfer. The only conclusion that can be reached from this evidence is that the deceased and his wife provided Peter with some assistance to obtain the house but that the value of that assistance is unclear and is not likely to have been substantial.
In his first affidavit, Peter provided the following summary of his assets and liabilities:
| ASSETS | |
| Werrington Downs property | $300,000.00 |
| Holden car 1999 | $4,000.00 |
| Toyota van 1994 | $3,500.00 |
| House contents | $10,000.00 |
| Bank account balance as at 15.12.10 | $723.00 |
| LIABILITIES | |
| Loan from Camille Santos [his stepdaughter] | $10,000.00 |
| NETT [sic] WORTH | $308,223.00 |
He explains the loan from Ms Santos as being a loan to pay off his credit card. However, in his affidavit he also said that he owed $18,459.38 on his Mastercard, which he said in an affidavit sworn on 12 April 2012 had increased to $23,098.90.
At the time Peter swore his first affidavit, he owned the house at Werrington Downs. However, during the course of cross-examination, it emerged that on 23 September 2011 he sold that house to his stepdaughter for $200,000, although a valuation obtained at the time suggests that it was worth $360,000. No part of the consideration has been paid. Peter could not give any satisfactory explanation for this transaction. He said in crossexamination that it was to benefit his children because the consideration payable by his stepdaughter would be paid to them. That explanation is implausible. In my opinion, the likely explanation is that he transferred the house to his step-daughter in an attempt to avoid the consequences of an adverse costs order in these proceedings.
Peter lists his monthly expenses as totalling $1,895. That amount includes ordinary living expenses for utilities, food and clothing. It also includes a payment he makes to his daughter, who is studying, of $200 per month and payments of $250 per month which he makes to support two people living in the Philippines.
Maureen and the deceased
Maureen completed her high school certificate in 1971. She then studied accountancy parttime and worked for chartered accountants for approximately 3 years. In 1974, she commenced working for ANZ Bank. She married her first husband in 1974. They had one child.
In 1977, Maureen and her husband bought land at Bangor and built a house on that land. They separated in 1989 and divorced in 1993. Maureen continued to live in the home at Bangor until 2006.
In May 2002, Maureen met her second husband, Stephen, who moved into the home at Bangor about six months later. They were married in September 2003. By that stage, the mortgage that Maureen had taken out over the Bangor property had been repaid.
In March 2004, Maureen took out a mortgage over the Bangor property for $480,000 and used part of that money to buy an investment property at Lake Heights for $370,000. In July 2005, she borrowed $60,000 secured by a mortgage against the Lake Heights property.
Maureen had a close relationship with her parents. Her mother had a knee replacement in 2000 and Maureen often stayed with her father at Pitt Town while her mother was in hospital. In 2004, her father was hospitalised following a stroke and again Maureen stayed with her mother during that time.
In February 2006, Annie asked if Maureen and Stephen could move into the Pitt Town property to assist the deceased and her with their daily care. Maureen and Stephen agreed to do so. They leased the house at Bangor. While living at the Pitt Town property, Maureen and Stephen made various improvements to the property. They painted, recarpeted and installed a wardrobe in the bedroom they occupied. They installed a new kitchen and new bathroom and tidied up the property and bought various equipment such as a ride on lawnmower, television and solar hot water system. In her first affidavit, Maureen gives a lengthy list of expenditure for maintenance and ancillary costs relating to her parents' care. The list totals approximately $100,000, although it includes an allowances for Stephen's labour, which is not separately quantified. It is clear from the evidence - and not disputed by the plaintiffs - that Maureen was a loving and devoted daughter who went out of her way and made considerable personal sacrifices to ensure that her parents were properly looked after.
Annie had a stroke on 1 November 2006, following which she needed 24 hour nursing care. She was admitted to a nursing home, where she died on 6 February 2007. During that time, Stephen used to take the deceased to visit his wife every day.
The deceased was very much affected by Annie's death. Maureen described him as "inconsolable". Peter described him "as very down and depressed" and says that, following Annie's death, the deceased lost interest in the activities that he had enjoyed previously. Following Annie's death, the deceased also became concerned about his own future and, in particular, whether he would be able to remain living at the property at Pitt Town. Maureen says that she assured him on numerous occasions that she and Stephen would continue to care for him. I accept that evidence.
In early March 2007, the deceased raised with Maureen the subject of transferring the Pitt Town property to her. Maureen gives evidence (which I accept) that they had a conversation to the following effect:
Dad: "Maureen, I want to give you this property. You have looked after Mummy and me and I want you to keep looking after me."
Me: "Dad, you know that Steve and I will continue to take care of you. Just leave things as they are."
Dad: "No, I want you to have this."
Me: "But what about Peter?"
Dad: "Peter's had enough. He's lost everything he was ever given."
Me: "Dad, let's talk about it some other time."
The deceased raised the issue again approximately a week later. The conversation was to the following effect:
Dad: "I need to sign the paperwork to put this house in your name. I've got the deed to it with my papers."
Me: "Dad, why don't you just give me half. We can both own it together."
Dad: "That's not what I want. You're to have it."
Following that conversation, Maureen instructed Mr Grogan, who had acted for the mortgagee in relation to the mortgage of her home, to arrange to prepare the transfer of the half interest in the property and to obtain a valuation of that interest for stamp duty purposes.
Maureen then took her father to meet with Mr Grogan on 11 July 2007. Maureen was present during the whole of the conference with Mr Grogan. During the conference, Mr Grogan asked the deceased whether he had any children. The deceased told him that he had not seen John for 30 years and was leaving him $2,000 and that he had given substantial funds and property to his son, Peter, whom he said he saw rarely. He said that Maureen was the one looking after him and that he wanted that to continue and that transferring the property to her was his way of confirming that that would happen. Mr Grogan discussed the possibility that his children might make a claim against the estate at some point in the future, although there was no specific mention of a family provision type claim. The deceased said that the rest of his estate was going to be split between Maureen and Peter.
At some point, there was a discussion about the fact that the transfer that Mr Grogan had prepared was for half the property. The deceased asked that the transfer be amended to transfer the whole property to Maureen. Mr Grogan described him as being "very adamant about it". The transfer was amended and the deceased signed it that day.
Mr Grogan did not give the deceased any advice concerning the appropriateness of the transaction.
The property at Bangor was sold in June 2009 for $612,500. There was a mortgage over that property securing borrowings of approximately $480,000. After repaying that mortgage, Maureen spent the balance of the sale price on an overseas holiday and various other expenses.
Maureen did not tell Peter that the house at Pitt Town had been given to her until several weeks after the deceased's death. At that time Peter says that they had a conversation to the following effect:
I said: "What's happening with the Estate?"
Maureen said: "By the way Dad gave me this house."
I said: "How could he do that? He had alzheimers."
Maureen said: "He gave it to me before he was medically declared to have alzheimers. Dad told everybody that he is fed up with you. He has given you too much and you are not getting any more."
I said: "Everything I have ever borrowed I have given back."
Maureen said: "If you want to do anything about it talk to Grogan & Webb, my solicitors."
Maureen accepts that a heated conversation along these lines occurred, although she denies ever using the word "alzheimers" and she says that she said that Peter could speak to Dennis Grogan who was handling the deceased's estate.
Leaving the house at Pitt Town aside, Maureen gave evidence that her assets were the investment property at Lake Heights, which is encumbered by a mortgage of approximately $60,000, and her superannuation. The property is untenanted. In her affidavit evidence, Maureen estimated the property to be worth $260,000. However, according to a valuation prepared by Statewide Valuations Pty Ltd, which I accept, its value is in the order of $400,000. Maureen also said in her affidavit that she had superannuation of "about $28,000". During the hearing, it emerged that she had superannuation of approximately $38,000. In his affidavit evidence, Stephen said that he had no assets of "any substance" (other than the Lake Heights property). In fact, however, he has superannuation of approximately $100,000.
The Pitt Town property is now worth in the order of $900,000 to $950,000.
Maureen earns approximately $4,000 per month from a legal registration business which she established in 1999. Stephen works as a site supervisor in the building industry. His income is approximately $110,000 per annum plus a car allowance.
Maureen lists her monthly expenses as totalling $4,824, including $500 a month which she contributes to her grandchildren. Those expenses are met from her income and $1,800 per month which Stephen gives her as a contribution towards household expenses. Stephen lists his monthly expenses as $8,136 per month, including the $1,800 per month he gives to Maureen and approximately $2,200 per month relating to car expenses, which are tax deductible.
There is no evidence to suggest that Maureen's and Stephen's health is other than good.
The estate and legal costs
At the time of the deceased's death, the only substantial asset of the estate was cash of approximately $206,000. After allowing for interest on that amount and legal fees incurred by the estate and legal fees that it is estimated the estate will incur in these proceedings, but has not yet paid, the net distributable estate is estimated to be approximately $113,000. John's legal costs on a solicitor client basis are estimated to be approximately $86,000 and on a party/party basis approximately $53,000. Peter's estimated legal costs on a solicitor client basis are approximately $97,000 and on a party/party basis approximately $74,000.
Undue influence
The general principles relating to undue influence were usefully summarised by Gzell J in Tulloch (deceased) v Braybon (No 2) [2010] NSWSC 650, at [38] in these terms:
Equity avoids dispositions of property procured by the improper or unconscientious use of the influence of one person over another, that cannot be explained on the grounds of friendship, charity or other ordinary motives on which people ordinarily act [National Westminster Bank plc v Morgan [1985] AC 686, 708; Bank of New South Wales v Rogers (1941) 65 CLR 42, 54]. Undue influence may be established by proof that the disponor's assent was in fact procured by undue influence ("actual undue influence"), or by an unrebutted presumption arising from the existence of a relationship of influence between the parties where the quantum or improvidence of the transaction is such that it cannot be explained on grounds of friendship, relationship, charity, or other ordinary motives ("presumed undue influence") [Whereat v Duff [1972] 2 NSWLR 147, 168; Quek v Beggs (1990) 5 BPR 11,761; Allcard v Skinner (1887) 36 Ch D 145, 185; Goldsworthy v Brickell [1987] Ch 378, 400-1]. Some relationships - such as parent and child, guardian and ward, solicitor and client, doctor and patient, (probably) spiritual adviser and follower, and (arguably) fiancé and fiancée - are presumed to be relationships of influence. In addition, a relationship of influence can be established by showing that it is one which involves ascendancy and influence on the part of the dominant party, or dependence, reliance, trust and confidence on the part of the weaker party [Johnson v Buttress (1936) 56 CLR 113, 134-5; Stivactas v Michaletos (No 2) (1993) NSW ConvR 55-683, 59-908].
Although the relationship between parent and child is one which is well-accepted as giving rise to a presumption of undue influence, that is only true insofar as a parent is presumed to exercise influence over his or her child. There is no presumption in the opposite direction: Brown v New South Wales Trustee & Guardian [2011] NSWSC 1203 at [46] per Brereton J. Consequently, in order to establish a presumption that a child has exercised undue influence over his or her parent, it is necessary to prove that there was a 'special relationship' of influence between the parties. In Quek v Beggs (1990) 5 BPR 11,761 at 11,764, McClelland J stated that two circumstances must be proved if a presumption of undue influence is to arise. They are:
(a) that at the time the gift was made there existed a relationship between the donor and the donee of such a nature as to involve reliance, dependence or trust on the part of the donor resulting in an ascendancy on the part of the donee; and (b) that the gift is so substantial, or so improvident, as not to be reasonably accounted for on the grounds of friendship, relationship, charity or other ordinary motives on which ordinary persons act...
As Cotton LJ explained in Allcard v Skinner (1887) 36 Ch D 145 at 171 (quoted with approval by McClelland J in Quek v Beggs at 11,764), in cases where the presumption applies "the Court interferes, not on the ground that any wrongful act has in fact been committed by the donee, but on the ground of public policy, and to prevent the relations which existed between the parties and the influence arising therefrom being abused".
It is not necessary to show that the relationship is one of domination by the donee of the donor. A position of dependence or trust enabling the donee to influence the donor is enough: Stivactas v Michelatos (No 2) (1993) NSW ConvR 55-683 at 59,908 per Sheller JA.
In order to rebut the presumption, it must be proved that "the gift was the independent and well-understood act of a man [or woman] in a position to exercise a free judgment based on information as full as that of the donee": Johnson v Buttress (1936) 56 CLR 113 at 134 per Dixon J. Relevant to that question is whether the intention to make the gift originated with the donor: Watkins v Combes (1922) 30 CLR 180 at 196 per Isaacs J. But that is by no means conclusive: Spong v Spong (1918) 18 CLR 544 at 549 per Griffiths CJ. The real question is how the intention was produced: Hewitt v Gardner [2009] NSWSC 1107 at [73] per Ward J.
Whether or not the donor received independent advice on the transaction will be important in proving an independent and well-understood act of free will. As Latham CJ stated in Johnson v Buttress at 119-120:
It may not be necessary in all cases to show that the donor received competent independent advice...But evidence that such advice has been given is one means, and the most obvious means, of helping to establish that the gift was the result of the free exercise of independent will; and the absence of such advice, even if not sufficient in itself to invalidate the transaction, would plainly be a most important factor in determining whether the gift was in fact the result of a free and genuine exercise of the will of the donor.
When there is evidence of advice to the donor, that advice must be both independent and effective for the purpose of enlivening the client's appreciation of the transaction, its legal effects and the alternatives (if any) which are open to the client: Strivactas v Micelatos (No 2) at 59,903 per Kirby P. In other words, the advice must be sufficient to operate as 'an antidote' to the invalidating presumption arising in the context of the doctrine of undue influence: Hewitt v Gardner at [77] per Ward J.
Finally, it has also been said that the onus on the donee seeking to uphold the transaction in the face of a presumption of undue influence will be much heavier where the donor has given away practically all of his or her property: Johnson v Buttress at 120 per Latham CJ.
In the present case, Mr Hodgson, who appeared for Peter, relied on medical assessments and reports concerning the deceased between 2004 and 2007 to support the conclusion that a presumption of undue influence arose in this case and had not been rebutted by Maureen. Mr Hodgson attached particular significance to the fact that those assessments and reports revealed that the deceased was suffering from mild dementia. It is not necessary to refer to them all. Many of them were to similar effect. An example is a report of Dr Meng Chew, community physician, staff specialist, Aged Care Assessment Team, concerning an examination on 12 December 2006 which said:
Thank you very much for referring this 90 year old man for a dementia assessment. He was recently seen by our Aged Care Assessment team and dementia was suspected. His daughter Maureen was present.
According to Maureen he was seen by Dr Park in 2004 and possibly diagnosed with a multi infarct dementia. He had a stroke in 2004 and a pacemaker was inserted soon after his stroke. He was placed in Kurrajong nursing home after his stroke. His daughter and soninlaw have moved into his house in February to care for him. He is functionally independent in self care. He is able to make the bed, sweep the garden and wash up. He is continent. He has had falls in the past but not recently. He walks his dog and watch[es] television. He came from Ireland in 1973 and does not smoke or drink.
His current medications are Warfarin, Ditropan and Stemetil bd for dizziness.
Clinically he is a pleasant man and communicates well. He has a wide based gait and was unable to do tandem walking. His balance is normal. His heart sound and carotids were normal. He scored 21/30 on the mini mental state Examination perform[ed] by our nurse a few weeks [ago].
I think he has a mild vascular dementia. He is isolated and I have reinforced the need for day centres for stimulation and socialisation. He is approved for an aged care package.
Another example is an Aged Care Assessment Team (ACAT) report dated 3 April 2007 which records the following under the heading "Specific details relating to functional and activity profile":
Mr Courtney has a Hx of dementia and depression, managed by GP. He is I/C of urine and occasionally of faeces. He requires A x 1 with his personal pads. He requires A x1 with personal care and his transfers and mobility. He has a Hx of falls and is a high falls risk. His gait is poor. He requires A x1 with his medications and meals - prompting and encouragement is required. Mr Courtney is on Warfarin which is an added risk with his falls Hx.
The report also records the following under the heading "Comments for Care Providers/rationale for the Care Recommendation":
Mr Courtney has an Hx of dementia Dx in DEC'06. His wife died 8 weeks ago. He is living with his daughter and family in their home. Since his wife's death Mr Courtney's general health & level of function has gradually declined. He was well supported by his family, formal & community services. He had several falls the last has resulted in an admission to hospital with severe, extensive bruising/haematoma to his ® side. Mr Courtney and his family wish to return home after his hospitalisation. He will now require high level care to meet his increased care needs, access to respite and a dementia (?).
The report concluded that the deceased should be approved for high level residential care and high level respite care.
There was other evidence to indicate that the deceased became disorientated from time to time. Peter gave evidence of occasions on which his mother told him that the deceased had driven her to the local shops and had gone home without her and of an occasion when the deceased had forgotten where he had parked the car. He also said that, from time to time, the deceased could not remember the names of his great grandchildren or who they were. When he stayed with Peter he sometimes forgot where the toilet was and he would sometimes forget what he was talking about or would repeat a story that he had told 5 minutes earlier. This evidence is consistent with the medical reports and I accept it.
Mr Hodgson also placed considerable emphasis on the fact that Mr Grogan saw the deceased with Maureen and did not give the deceased any advice concerning the risks of the transaction. Mr Hodgson accepted that the deceased had the mental capacity to understand the nature of what he was doing. However, Mr Hodgson submitted that, because of the deceased's dementia, the deceased did not have the capacity to think through clearly the possible consequences of what he was doing and, in circumstances where those consequences were not explained to him, the court could not be satisfied that the gift was the independent and well-understood act of a man in a position to exercise free judgment.
In my opinion, the evidence is sufficient to establish that a presumption of undue influence arises in this case. The deceased was physically, mentally and, following the death of his wife, emotionally frail. He was concerned that he would not be able to continue to live at the Pitt Town property and he was wholly dependent on Maureen to be able to do so. In my opinion, that put Maureen in a position of influence over him. Moreover, the gift of the house at Pitt Town was so substantial compared to the deceased's total assets at the time that I do not think that it can reasonably be accounted for on the basis of the admittedly close relationship that existed between them.
Nonetheless, in my opinion, Maureen has rebutted the presumption of undue influence in this case. I accept Maureen's evidence that she tried to dissuade her father from pursuing the gift of the house to her. When that failed, she made arrangements with Mr Grogan for half the house to be transferred to her. It was at the deceased's insistence that the transfer was amended so as to cover the whole house. Far from exercising the influence she had over the deceased to obtain the house, she sought unsuccessfully to exercise that influence to dissuade the deceased from pursuing the course he did. In my opinion, that fact provides a complete answer to the case based on undue influence.
Unconscionable conduct
The principles relating to unconscionable conduct are closely related to but distinct from the principles relating to undue influence. As Deane J explained in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 474-5:
The jurisdiction of courts of equity to relieve against unconscionable dealing developed from the jurisdiction which the Court of Chancery assumed, at a very early period, to set aside transactions in which expectant heirs had dealt with their expectations without being adequately protected against the pressure put upon them by their poverty (see O'Rorke v Bolingbroke (1877) 2 App Cas 814 at 822). The jurisdiction is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them, and (ii) that disability was sufficiently evident to the stronger party to make it prima facie unfair or "unconscientious" that he procure, or accept, the weaker party's assent to the impugned transaction in the circumstances in which he procured or accepted it. Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable: "the burthen of shewing the fairness of the transaction is thrown on the person who seeks to obtain the benefit of the contract" (see per Lord Hatherley, O'Rorke v Bolingbroke, supra, at 823; Fry v Lane (1888) 40 ChD 312 at 322; Blomley v Ryan (1956) 99 CLR 362 at 428-9).
The equitable principles relating to relief against unconscionable dealing and the principles relating to undue influence are closely related. The two doctrines are, however, distinct. Undue influence, like common law duress, looks to the quality of the consent or assent of the weaker party (see Union Bank of Australia Ltd v Whitelaw [1906] VLR 711 at 720; Watkins v Combes (1922) 30 CLR 180 at 193-4; Morrison v Coast Finance Ltd (1965) 55 DLR (2d) 710 at 713). Unconscionable dealing looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so. The adverse circumstances which may constitute a special disability for the purposes of the principles relating to relief against unconscionable dealing may take a wide variety of forms and are not susceptible to being comprehensively catalogued. In Blomley v Ryan (supra, at 405). Fullagar J listed some examples of such disability: "poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary". As Fullagar J remarked, the common characteristic of such adverse circumstances "seems to be that they have the effect of placing one party at a serious disadvantage vis-à-vis the other".
Similarly, in the same case, Mason J said (at 461):
Although unconscionable conduct in this narrow sense bears some resemblance to the doctrine of undue influence, there is a difference between the two. In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position.
His Honour went on to explain (at 462) that what was necessary was the disadvantageous position was one that seriously affected the innocent party's ability to make a judgment concerning the transaction in question:
I qualify the word "disadvantage" by the adjective "special" in order to disavow any suggestion that the principle applies whenever there is some difference in the bargaining power of the parties and in order to emphasize that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party.
As with undue influence, it is not necessary that the transaction be instigated by the stronger party. The doctrine applies where "it must have occurred to the mind of a reasonable person that there was some real possibility that the other party's entry into the transaction was due to an inability to make a judgment as to what was in that party's best interests": Jedda Investments Pty Ltd v Krambousanos (1997) 72 FCR 138 at 148 per Burchett, Carr and Kiefel JJ.
Also as with undue influence, the existence of independent advice is important. But in this context, it is the opportunity to obtain independent advice or the absence of that opportunity which is important, not the effect that that advice might have produced. The absence of the opportunity is an element of unconscientious conduct: Bridgewater v Leahy (1998) 194 CLR 457 at [100] per Gaudron, Gummow and Kirby JJ.
Mr Hodgson submitted that the deceased suffered from a special disability or disadvantage because of his emotional distress following the death of his wife together with his dementia and other health issues that made him dependent on Maureen. Maureen, knowing those facts, took unconscientious advantage of that state of affairs by accepting the gift of the Pitt Town property in circumstances where there was no benefit in the transaction to the deceased and, in particular, no enforceable counter-promise made by Maureen to care for the deceased and in circumstances where the deceased received no independent advice on the merits of the transaction.
I accept that the deceased did not receive independent advice in relation to the merits of the transaction. Although Mr Grogan asked the deceased a number of questions concerning the transaction, he did not advise the deceased of the risks of the transaction and did not do so in Maureen's absence.
The real question, however, is whether at the time the deceased made the gift, he suffered from a special disability because the conditions from which he suffered meant that his ability to judge what was in his own best interests was seriously impaired and Maureen knew or ought to have known of that fact. I am not satisfied that the deceased's ability to judge what was in his own best interests was seriously impaired. There is evidence that the deceased's dementia affected his memory. That is one of the matters that affected his ability to care for himself and, in turn, was one of the matters that made him dependent on Maureen. However, in the absence of expert evidence, it is not possible to conclude that the deceased's dementia affected his ability to evaluate the transaction. In evaluating the transaction, it was necessary for the deceased to make an assessment of Maureen and the genuineness of her desire to care for him. It was also necessary for the deceased to evaluate the risks of making the gift against what was obviously a strong sense of gratitude he felt and his desire to express that gratitude. The principle risk was that Maureen would predecease him or would herself become incapable physically or financially of looking after him. In my opinion, Maureen had a genuine desire to look after the deceased and, as I have already said, she was prepared to make considerable personal sacrifices to do so. Although the gift appears to be extravagant or imprudent, it was open to the deceased to conclude that the risks of Maureen predeceasing him or becoming incapable of looking after him were small and were risks that he was willing to take. She moved into the house with her husband at Annie's request. They made the house their own home and spent significant money and effort in improving it. They both went to a great deal of trouble to look after the deceased and Annie. They were both employed and there is no suggestion that they were in any financial difficulties. Consequently, I do not think that it can be inferred from the transaction itself that the deceased's dementia prevented him from properly evaluating it. Also, it is not suggested that the deceased was incapable of understanding what he was doing. For the reasons I have given, any evaluation the deceased undertook was quite independent of Maureen. This is not a case where the deceased's dependence on Maureen affected his ability to exercise independent judgment. Courts are naturally suspicious of transactions in which an elderly and frail person gives his or her principal asset to a family member. But in this case, there were good reasons for the deceased having confidence that Maureen would continue to look after him; and that, of course, is what she did. And there were good reasons why the deceased might have wished to show her gratitude. Taking those matters into account, I do not think that it can be inferred that the transaction was one from which it should be concluded that the disabilities from which the deceased suffered impaired his ability to evaluate it.
For those reasons, the claim based on unconscionable conduct must fail.
The claims for a family provision order
Section 59 of the Act relevantly provides:
(1) The Court may, on application under Division 1, make a family provision order in relation to the estate of a deceased person, if the Court is satisfied that:
(a) the person in whose favour the order is to be made is an eligible person, and
(b) ...
(c) at the time when the Court is considering the application, adequate provision for the proper maintenance, education or advancement in life of the person in whose favour the order is to be made has not been made by the will of the deceased person ...
(2) The Court may make such order for provision out of the estate of the deceased person as the Court thinks ought to be made for the maintenance, education or advancement in life of the eligible person, having regard to the facts known to the Court at the time the order is made.
There is no question that John and Peter are eligible persons within the meaning of s 59(1)(a). The question is whether they satisfy the other requirements of s 59.
Section 60 of the Act provides that the court may have regard to a broad range of matters for the purpose of determining whether to make a family provision order and the nature of any order. Those matters relevantly include the following (see s 60(2)):
(a) any family or other relationship between the applicant and the deceased person, including the nature and duration of the relationship,
(b) the nature and extent of any obligations or responsibilities owed by the deceased person to the applicant, to any other person in respect of whom an application has been made for a family provision order or to any beneficiary of the deceased person's estate,
(c) the nature and extent of the deceased person's estate (including any property that is, or could be, designated as notional estate of the deceased person) and of any liabilities or charges to which the estate is subject, as in existence when the application is being considered,
(d) the financial resources (including earning capacity) and financial needs, both present and future, of the applicant, of any other person in respect of whom an application has been made for a family provision order or of any beneficiary of the deceased person's estate,
(e) if the applicant is cohabiting with another person-the financial circumstances of the other person,
(f) ...,
(g) the age of the applicant when the application is being considered,
(h) ...,
(i) any provision made for the applicant by the deceased person, either during the deceased person's lifetime or made from the deceased person's estate,
(j) any evidence of the testamentary intentions of the deceased person, including evidence of statements made by the deceased person,
(k) ...,
(l) ...,
(m) the character and conduct of the applicant before and after the date of the death of the deceased person,
(n) the conduct of any other person before and after the date of the death of the deceased person,
(o) ...,
(p) any other matter the Court considers relevant, including matters in existence at the time of the deceased person's death or at the time the application is being considered.
It is well established that ss 59(1) and (2), like their predecessors, ss 7 and 9(2) of the Family Provisions Act 1982 (NSW), require the court to adopt a two stage process. In the first stage, the court must consider whether the applicant has been left without adequate provision for his or her proper maintenance, education and advancement in life. If the answer to that question is yes, the court must determine what order, if any, should be made: Singer v Berghouse [1994] HCA 40; (1994) 181 CLR 201 at 208-210 per Mason CJ, Deane and McHugh JJ; Vigolo v Bostin [2005] HCA 11; 221 CLR 191 at [5] per Gleeson CJ; [56] per Gummow and Hayne JJ; [112] per Callinan and Heydon JJ. The first stage goes to the court's jurisdiction. The second stage involves an exercise of a discretion. When considering both stages, the court may have regard to the matters set out in s 60(2) of the Act.
The use of the word "proper" in s 59(2) requires the court to consider all the surrounding circumstances in determining whether adequate provision has been made by the deceased. As Callinan and Heydon JJ explained in Vigolo v Bostin [2005] HCA 11; 221 CLR 191 at [114]:
[The word "proper"] implies something beyond mere dollars and cents. Its use, it seems to us, invites consideration of all of the relevant surrounding circumstances and would entitle a court to have regard to a promise of the kind which was made here. Unfortunately for the appellant however, and as will appear, the making of that promise is not the only, and is indeed, far from a conclusive fact in the appellant's favour. The use of the word "proper" means that attention may be given, in deciding whether adequate provision has been made, to such matters as what used to be called the "station in life" of the parties and the expectations to which that has given rise, in other words reciprocal claims and duties based upon how the parties lived and might reasonably expect to have lived in the future.
Section 63(5) of the Act provides:
A family provision order may be made in relation to property that is not part of the estate of a deceased person, or that has been distributed, if it is designated as notional estate of the deceased person by an order under Part 3.3.
Section 78 permits the court to make an order designating property as notional estate, but only for the purposes of a family provision order to be made under Part 3.2 or for the purposes of a costs order, but in the latter case only if a family provision order is made in favour of the applicant: s 78.
Section 80 of the Act relevantly provides:
(1) The Court may, on application by an applicant for a family provision order or on its own motion, make a notional estate order designating property specified in the order as notional estate of a deceased person if the Court is satisfied that the deceased person entered into a relevant property transaction before his or her death and that the transaction is a transaction to which this section applies.
(2) This section applies to the following relevant property transactions:
(a) a transaction that took effect within 3 years before the date of the death of the deceased person and was entered into with the intention, wholly or partly, of denying or limiting provision being made out of the estate of the deceased person for the maintenance, education or advancement in life of any person who is entitled to apply for a family provision order,
(b) ...,
(c) ....
The expression "relevant property transaction" is defined in ss 75 and 76. There is no dispute in this case that it includes the transfer of the Pitt Town property to Maureen.
Section 87 of the Act provides:
The Court must not make a notional estate order unless it has considered the following:
(a) the importance of not interfering with reasonable expectations in relation to property,
(b) the substantial justice and merits involved in making or refusing to make the order,
(c) any other matter it considers relevant in the circumstances.
In addition, the court must not make an order unless it is satisfied that "the deceased's person's estate is insufficient for the making of the family provision order, or any order as to costs, that the Court is of the opinion should be made": s 88; and then it may only do so to the extent necessary to satisfy the orders it makes: s 89.
The deceased's notional estate
The first question that arises under the Act is whether the Pitt Town property could be declared part of the deceased's notional estate. The answer to that question turns on whether the gift to Maureen was made with the "intention, wholly or partly, of denying or limiting provision being made out of the estate of the deceased person for the maintenance, education or advancement in life of any person who is entitled to apply for a family provision order": s 80(2)(a). Although s 80(2)(a) is expressed in the passive, in my opinion, it must be concerned with the subjective intention of the deceased. The word "intention" is concerned with the state of mind of an individual (or the states of mind of individuals); and the relevant individual must be the deceased, since it is the deceased's obligations with which the relevant provisions of the Act are concerned. Intention may, of course, be inferred from the objective facts.
The intention must be directed at "denying or limiting provision being made out of the estate". In order to have that intention, the deceased must appreciate that one or more persons may have a claim in respect of the relevant property and one of the reasons for the deceased entering into the transaction is to defeat that claim (in whole or in part). Although the section is not expressed in those terms, it is difficult to see how the deceased could have the required intention if the deceased did not think that the property itself was necessary to meet possible claims. For example, it is difficult to see how the deceased could have the required intention if the deceased believed that his or her estate absent the relevant property was sufficiently large to meet any potential claims. However, in my opinion, it is not necessary that the deceased appreciate the precise nature of the claim that may be made - for example, that the claim may be made under s 59 of the Act. It is sufficient if the deceased believes that some sort of claim could be made and one of the reasons he or she entered into the transaction was to defeat that claim (in whole or in part).
Where property is transferred, an inevitable effect of the transfer is that, absent a notional estate order, the property will not be available to meet a claim for a family provision order. But effect, even inevitable effect, is different from intention. Intention requires that the relevant result (denying or limiting provision being made out of the deceased's estate) is one that is sought to be secured by the transaction in question, although again that intention may be inferred from the consequence.
In the present case, the question can be reduced to the question whether one of the things the deceased sought to achieve by transferring the Pitt Town property to Maureen was to deprive John or Peter of a claim in respect of it. That was clearly not the deceased's primary object. The deceased's primary object was to benefit Maureen as a means of expressing his gratitude for what she had done (and what he expected she would continue to do). The question is whether it was a secondary intention of the deceased to deprive John or Peter of a right to make a claim in respect of the property.
In support of the conclusion that the deceased had a secondary object of depriving Peter of an interest in the property, Mr Hodgson points to the conversation between Maureen and the deceased in which the deceased said "Peter's had enough. He's lost everything he was ever given." He also points to the conversation between Maureen and Peter in which Maureen said "Dad told everybody that he is fed up with you. He has given you too much and you are not getting any more." Mr Hodgson submits that that statement is an explanation by Maureen of why the deceased transferred the property and as a statement against interest it carried considerable weight, particularly in light of the statement that the deceased made to Maureen at the time of the transfer.
I accept Mr Hodgson's submission on this point. In my opinion, when Maureen said to Peter that "you are not getting any more" she was not simply expressing her own view but she was repeating a view that the deceased had communicated to her. In the context, the view expressed is to be understood as a view that Peter was not entitled to any more. That conclusion is supported by the statement that "Dad told everybody that he is fed up with you". It is also consistent with the earlier conversation in which the deceased said "Peter's had enough". The view that Peter had had enough and that he was not getting any more was a reason the deceased gave for giving the house to Maureen. But to say that is to say that, by giving the house to Maureen, the deceased intended that it would not be available to Peter. The fact that that was only part of what the deceased intended, and a minor part at that, does not alter the position. That intention it seems to me amounts to an intention to defeat any claim Peter might have. That is sufficient to satisfy the requirements of s 80(2)(a) of the Act.
Was John left without adequate provision for his proper maintenance etc?
In answering this question, two features about John are particularly significant. The first is that he had no contact with the deceased for 36 years. The second is that, apart from the pension, he has no income and no assets to speak of. He is effectively dependent on the charity he receives from Sacred Heart for his accommodation and meals.
In Andrew v Andrew [2011] NSWSC 115 at [74] Hallen AsJ helpfully summarised the principles that apply where there is evidence of estrangement between the deceased and the plaintiff in these terms:
(a) The word 'estrangement' does not, in fact, describe the conduct of either party. It is merely the condition that results from the attitudes, or conduct, of one, or both, of the parties. Whether the moral claim of the Plaintiff on the deceased is totally extinguished, or merely reduced, and the extent of any reduction, depends on all the circumstances of the case (Gwenythe Muriel Lathwell, as Executrix of the Estate of Gilbert Thorley Lathwell (Dec) v Lathwell [2008] WASCA 256 at [33]).
(b) The nature of the estrangement and the underlying reason for it is relevant to an application under the Act: Palmer v Dolman; Dolman v Palmer [2005] NSWCA 361at [88]-[94]; Foley v Ellis [2008] NSWCA 288.
(c) There is no rule that irrespective of a Plaintiff's need, the size of the estate, and the existence or absence of other claims on the estate, the Plaintiff is not entitled to "ample" provision if he, or she, has been estranged from the deceased. The very general directions in the Act require close attention to the facts of individual cases.
(d) The court should accept that the deceased, in certain circumstances, is entitled to make no provision for a child, particularly in the case of one "who treats their parents callously, by withholding, without proper justification, their support and love from them in their declining years. Even more so where that callousness is compounded by hostility": Ford v Simes [2009] NSWCA 351 at [71] per Bergin CJ in Eq, with whom Tobias JA and Handley AJA agreed.
In Andrew v Andrew, which bears a number of similarities to the present case, the deceased left a net distributable estate of approximately $800,000. She was survived by 5 children, including the plaintiff. The plaintiff was 61 years old. She had no assets and no income apart from Centrelink payments of approximately $1,185 per month. Apart from 2 occasions, the plaintiff did not see the deceased in the 35 years prior to the deceased's death. There was no particular reason for the breakdown in their relationship. The deceased left the plaintiff a legacy of $10,000, with the balance of her estate to be divided (although not equally) between her other 4 children, none of whom was particularly well off. His Honour concluded that the plaintiff had failed to establish that she had been left without adequate provision for her proper maintenance, education or advancement in life.
Other cases involving similar facts provide some guide in answering the jurisdictional question of whether adequate provision has been provided. But they are not a substitute for a careful analysis of the particular facts of the case in question.
Many cases of estrangement involve a detailed investigation of the circumstances which brought about the estrangement with a view to identifying the cause of it and the extent to which the claimant or the deceased was responsible for it. But even in those cases, as Sackville AJA (with whom Beazley and Basten JJA agreed) pointed out, in Foley v Ellis [2008] NSWCA 288 at [102] "[c]are should be taken ... not to oversimplify the complex and nuanced relationships within a family by yielding to the temptation to condemn categorically the behaviour of one party or the other". In this case, however, as in Andrew v Andrew, it is difficult to explain the estrangement by reference to the relationship between the parties. A possible explanation of the estrangement in this case is the psychological makeup of John. Although the evidence on that matter is scant, John's hoarding, his complete detachment from all members of his family and his inability to make any provision for himself to the point that he was living on the street suggest that he suffers from some psychological or personality flaw that needs to be taken into account in answering the jurisdictional question.
John chose, for whatever reason, to live a life that was entirely divorced from his family and from the deceased in particular. The estate and potential notional estate are not particularly large and consist largely of the house in Pitt Town. The deceased rightly made provision for Maureen and Peter. Neither is assured of a secure retirement. Peter is wholly dependent on the aged pension. Although he is married, his wife is dependent on unemployment benefits; and the prospects of her finding employment are not good. Maureen's position is better. Both she had her husband still work and together they earn a decent income. However, leaving aside the house in Pitt Town, their savings are modest and it is unclear for how many years they will be able to continue to work. In those circumstances, in my opinion, the question whether John has been left with adequate provision for his proper maintenance etc must largely be judged by reference to the life that he has chosen to live. Under the terms of his agreement with Sacred Heart, all his needs are provided for. Measured by the standard of the life he has chosen to lead, if that contract continues, in my opinion he has not been left without adequate provision. The complication, however, is that John is unable to comply with his obligations under his agreement with Sacred Heart and to pay the storage fees for which he is currently liable. He receives approximately $1460 per month. From that, he pays storage fees of $840 leaving a balance of $620 per month. Under his resident's contract, he owes Sacred Heart approximately $830 per month. Although it might be inferred that he was in a position to pay a proportion of that amount, it is clear that he cannot pay it all from the money that remains after the payment of the storage fees. There is a risk therefore that John may not be able to continue to live in the hostel. That risk arises because Sacred Heart may no longer be in a position to care for John if he is unwilling to pay the modest amount it charges for the services it provides and because John may be unwilling to give up the storage he has in order to pay that amount. It is the risk of that happening and the fact that no provision has been made to deal with it which means that John has been left without adequate provision.
Was Peter left without adequate provision for his proper maintenance etc?
In determining whether Peter has been left without adequate provision, a preliminary question is what account should be taken of the fact that Peter sold his one substantial asset to his step daughter for an undervalue after these proceedings were commenced and has not received any part of the consideration payable under the contract of sale. Section 59 requires the court to consider the question whether Peter has been left without adequate provision by reference to the circumstances as they exist at the time it is considering the application. But in considering those circumstances, it is also necessary to consider how those circumstances came about. In the present case, Peter owned his own home at the time he commenced these proceedings. I have concluded that he disposed of that house in order to avoid the consequences of an adverse costs order. But even if that finding is wrong, Peter has offered no satisfactory explanation for why he did what he did. In the absence of a satisfactory explanation, I do not think that any weight should be placed on the fact that Peter has now disposed of his house.
However, even proceeding on that basis, I do not think that Peter has been left with adequate provision. The evidence suggests that the net distributable estate is in the order of $120,000, of which Peter will receive half. That, however, makes no allowance for Peter's legal costs or any costs the estate may have to pay in respect of John's claim. Leaving the house aside, Peter has no savings and is dependent on the pension he receives. His monthly expenses are modest, but they are only just covered by the income he and his wife receive. Included in his expenses are some modest payments that he makes to his daughter and two people in the Philippines which might be regarded as discretionary. However, his list of expenses make no allowance for contingencies or any other expenses. He has a substantial credit card debt. Although Peter does not seek to identify his needs, they at least include an amount for upkeep of the house in which he lives, repair costs to his motor vehicle and the costs of replacing it at some stage, and an additional amount to allow for contingencies. I have found that Peter generally had a good relationship with his father. The estate (including notional estate) is not so small that further provision for Peter would result in Maureen receiving less than she might legitimately expect to receive. The deceased provided some assistance to Peter during the course of his life. But that assistance was not large and I do not think that it provides a reason for concluding that Peter was left with adequate provision, even if the deceased expressed that view towards the end of his life. It follows that Peter was left without adequate support for his proper maintenance.
What provision should be made?
It follows from what I have already said that John should be entitled to sufficient provision to reduce the risk that he will not be able to continue to live in the hostel. It is not easy to assess what that amount is. Apart from evidence concerning the amount currently payable under John's agreement with Sacred Heart, no evidence was led which was relevant to that question. Several points, however, should be made about the assessment of an appropriate amount.
First, John currently owes a significant amount to Sacred Heart. As at August 2011, that amount was approximately $12,000. His annual fees under his agreement after making allowance for the government subsidy he receives are currently $10,000. Any amount should include the amount that John currently owes Sacred Heart.
Second, I do not think the assessment depends solely on determining the net present value of the fees payable under the agreement for the expected duration of John's life. That amount, if evidence had been led about it, would have formed the starting point of any assessment, but I do not think that that evidence would determine the question. John accepted in cross-examination that he did not need to retain all the storage space he currently has. Although John may find it difficult now to part with many of his possessions, it cannot be assumed that he will keep them indefinitely; and I do not think that the assessment of an appropriate amount should be made on the basis that John need not take any responsibility for paying the amounts owed by him under his resident agreement with Sacred Heart. In this respect, it needs to be borne in mind that any provision for John, if it is to be made, will have to come from Maureen. It is not for Maureen to prove that she has any entitlement. However, in my opinion, it is clear that she has a strong claim on her father's estate having regard to the care she provided to him, the contributions she and Stephen made to the Pitt Town house and her own needs. Lastly, although there may be a significant risk that John will not be able to remain at the hostel for the rest of his life if he makes no contribution to the costs of him doing so, that risk must reduce substantially if significant contributions are made on his behalf.
Third, ss 65 and 66 of the Act give the court broad powers to fashion an appropriate order. That includes a power to order that any provision that is made in favour of a claimant be held on trust for the claimant on terms determined by the court. Mr Butcher, who appeared for John, submitted that it would be appropriate in this case to order that any provision in favour of John be held on trust by the State Trustees Limited. I accept that submission. In my opinion, given John's failure to pay any of his accommodation fees to date, there is a real risk that he will not use any provision made for him to meet his obligations under resident agreement. The State Trustees will charge fees for acting as trustee in accordance with the provisions of the Trustee Companies Act 1984 (Vic). Those fees include a capital commission of up to 5.5 percent (inclusive of GST) and an income commission of up to 6.6 percent (inclusive of GST) received on gross income.
Doing the best I can on the evidence before me, in my opinion, an appropriate provision for John is $100,000 in substitution for the $2,000 that has been left to him. The amount currently owed by John under his resident agreement should be paid directly by the estate to Sacred Heart. The balance should be held on trust for John. I will hear the parties on the precise terms of the trust. However, at present my view is that the amount should be held by State Trustees Limited. During John's life, the capital and income should be applied solely to the payment of any fees or commission of the trustee and the payment of fees payable by John under his resident agreement or any agreement entered into by John in substitution for that agreement. John should be entitled to determine the amount that is paid in any year in discharge of his obligations under the resident agreement but that amount should not exceed 80 percent of the actual fees payable in respect of that year. On John's death, the balance, if any, of the amount held in trust should be paid to Maureen or her estate.
In my opinion, an appropriate provision for Peter is $200,000 in substitution for his half interest in the residual estate. That amount will permit Peter to discharge his debts and will provide him with a significant sum of money as a contingency and from which he can meet expenses beyond his day to day living expenses.
In my opinion, there is no reason not to make a notional estate order in respect of the Pitt Town property to give effect to these provisions. Given the circumstances in which the property was given to Maureen and her own attitude to the gift, Maureen could not have a reasonable expectation that the court would not make a notional estate order in respect of that property. Such an order is the only means by which provision can be made for John and Peter. For the reasons I have given, I think that those orders should be made. It follows that, to use the wording of s 87(b) of the Act, the "substantial justice and merits" are in favour of making a notional estate order.
The results of the orders in favour of John and Peter will reduce substantially the amount that Maureen will receive from her father. It is noteworthy, however, that even when those orders are made and costs are paid, Maureen will receive a similar amount to the amount that she would have received under the deceased's will before the gift of the Pitt Town property to her. Moreover, in my opinion, the effect of the orders that I propose to make are not so great that Maureen will be forced to sell the Pitt Town property if she does not want to. Although the position in relation to costs is not clear, the likelihood is that the total amount which will have to be met out of the estate or notional estate is in the order of $450,000. Consequently, the amount that will have to be met out of the notional estate is in the order of $340,000. Maureen should be in a position to pay that amount without selling the Pitt Town property either by borrowing against that property or by selling the property at Lake Heights.
I will hear the parties on the precise form of orders that should be made and on costs.
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Amendments
13 June 2012 - replaced "acted for her" with "acted for the mortgagee"
Amended paragraphs: 25
Decision last updated: 13 June 2012
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